Committee News

Update Committee Chairs

Surety Committee – Brendan Keating

I believe the broad topic of promotion of surety on a global scale should continue to be a prominent discussion for the surety committee. We need to continue to keep this an active source of discussion as all participants have a unique opportunity through the discussions to help influence the approach, plan and execution in promoting the surety product.

The sub topic of the promotion of surety in March’s meeting was on the European Commission accepting surety bonds as a form of collateral for commercial, litigious matters. At the moment, there are a number of stakeholders working to lobby the EC on recognizing surety bonds as an effective security instrument. We were also be presented with an update on the Canadian surety market where we saw firsthand how surety companies teaming together with regulatory bodies have been impactful for surety bonds becoming more acceptable for mine reclamation/rehabilitation requirements. Brendan Keating Chair of the Surety Committee Company: Argo Surety

These are just a couple sub-topics of the broader promotional topic that we discussed, but I hope this leads to other ways of opening conversations where individuals and companies from different parts of the globe can use this forum to brainstorm ideas for their local markets and the market globally.

ICISA is here to help promote the use of credit insurance and surety bonds, and we need to continue to leverage the network that ICISA has built throughout the globe with various regulatory bodies.

Committee of Underwriters – Igor Pirnat

The economic environment is still in upward trend and does not show signs of a turndown. Is this, with regard to the credit insurance business, a positive or negative aspect? I believe that when the economy is flourishing the companies are focused rather more on increasing turnover than on decreasing risk. And the role of risk underwriters here steps in as a keeper of safe and sound but still sustainable business. The main topics that CoU delegates covered can be divided into few different categories: Countries, Trade Sectors, Specific Buyers/Risks and Technical topics. On top of that members stretched their brains debating on the different interesting and challenging topics that they liked to address.

Main topics

Countries Different countries are getting covered. Russia is on the list for ages, also for the coming Spring Meeting. This time members shared their view regarding the sanctions. China is a very important business partner (import and export wise), and so the question of the trusted credit report providers was asked.

Trade Sectors The Automotive, Textile, Furniture and Pharmaceutical sectors are the sectors that were chosen for review this spring. All key sectors have high exposure to credit insurance.

Specific Buyers/Risks This category, in my opinion is the one, where the added value for participants if the highest. It is true that delegates acting in the same region may compete, but I strongly believe, that we act as risk underwriters, and hence have a battle against risk, not against each other. So, if we openly share information regarding risk of non-payment, we properly mitigate it. During the spring meeting the discussion focused on Carillion UK, Steinhoff restructuring and ECB involvement, Metro/ Ceconomy Group, Group Agrokor. Igor Pirnat Chair Committee of Underwriters Company: SID First Credit

Technical Topics

The following technical topics have been raised: • Do judicial restructuring schemes (such as Chapter 11) help credit insurers in the end? Almost all Countries have some kind of regulatory arrangement according to which companies in distress are for a certain period protected from any actions of creditors.

Pros and Cons of such schemes are going to be debated.

Role of an insurance broker in arranging the credit limit coverage. Do Brokers add value also to the credit insurer or just to the policy holder? Members are going be invited to share their views on how they see the role of the credit insurance broker.

Standard documentation for the transfer of limits when changing insurers (so-called hold cover).

Other (Open Debate) topics

We are living in a rocketing fast changing environment, not just in the economy, but in all areas of our life. As these changes would also affect the credit insurance industry, all members are invited to suggest any interesting and challenging topics for discussion (e.g. disruptive effect of digitalisation, blockchain, artificial knowledge, etc.) and to share their opinions and views.

Continuation of the Update Committee Chairs

Credit Insurance Committee – Judita Svetin

The credit insurance committee had a very long agenda for the Spring Meeting in Munich, I actually do not recall when we discussed more than 15 topics. What does this tell us about the industry? That we appropriately address a very changing and challenging environment? Are we as an industry, leaders in this respect, or followers?

The most prominent discussions in the CIC for the coming months are members feedback from relevant markets, role of a broker, Top Up cover, binding contracts cover, inventory of different cover type and insurance products offered on the market and updated index of topics already discussed in the CIC.

Tour of the table is always interesting and although we sit in the same boat, markets have their own specifics. Some people from the industry think that a good broker is a dead broker, personally I am of opinion that brokers are an essential part of the insurance business, but we have to see them as partners. Of course this means that we have to invest in setting the rules which we believe that a professional broker should consider. The traditions of brokers in different markets are very unlike and consequently also the code of practice varies (not even existing as obligatory for brokers).

The topic of Top Up cover will cover both ways offered to the market - as in house product as well as an arrangement with another insurer. What are the reasons to offer Top Up – is it mainly a capacity issue or also a hidden way to price more? Judita Svetin Chair of the Credit Insurance Committee Company: SID First Credit

Binding contract coverage is well known to the market and we shared members experiences on the claims, arising from this coverage.

As a more technical committee (in comparison to others) we also decided to make an inventory of different cover types and insurance products offered on the market. It sounds quite easy, but I am convinced that this topic will demand active engagement of all members and also a certain harmonisation. Another item of discussion was the index containing CIC agenda topics as from April 1993. The purpose is to improve access to the abundant source of knowledge and information currently available within the ICISA web-database.

I continue to count on the openness and willingness of the committee members to invest some time in the topics as well as to think “out of the box”.

Single Risk Committee – Olivier David

The most recent announcements coming from Brussel, London and Basle are at the centre of current conversations between the single situation credit and political risks insurers. From the chaotic uncertainties of Brexit to the coming (r)evolution of banking regulation that is to jeopardize the largest portion of our market’s income, discussions are mostly around action points and calendar.

While our legal colleagues are addressing the possibility of a cliff fall scenario of March 2019, it is upon the underwriters, their managers and their various representative bodies to try, for the first time, to climb Mt Everest that are the EU decision making bodies; and make them aware of the devastating consequences of the planned regulation on world trade finance.

The coming Basle regulation seems to be so extensive that banks need to focus their efforts on the most critical portion of their revenue. Trade, export and project finance are not on the top of their pile, but it is on the top of ours. For the moment, by insuring these financings, banks enjoy a capital relief that reduces their cost and makes this business attractive to them and to their customers alike. This has become the biggest portion of our market growth of the past 15 years. Olivier David Chair of the Single Risk Committee Company: Atradius

Conditioning this capital relief to an unconditional and on-demand financial guarantee (which we do not offer, and do not intend to) instead of a credit insurance policy, will automatically cut current insurers’ support and therefore the banks’ ability to finance their (European) customer trade activity.

Implementation of the new regulation is to start by 1/1/2022, once endorsed by the EU parliament in 2020. We thus have 18 months from today to try to influence the content of the regulation.

This will start by working all together through our various organisations, collect data that will make our speech relevant and then engage with influencers and MEP. An uphill battle for sure that could make or break our future.